QLogic sells primarily to original equipment manufacturers and its 10 biggest customers drive nearly 85% of revenue. Its business is hardly discretionary, it enjoys pricing power, and the recently acquired InfiniBand operation could drive further growth. At about 15, volatile shares are up 7% this year -- enviable in 2008 but hardly outrageous given its recent habit of beating estimates. Shares fetch 13.5 times 2009 profits -- in line with peers and reasonable when you consider how its 22% net profit margin is twice as good as the computer-storage sector.

Morgan Stanley said it is downgrading QLogic (QLGC) to Underweight from Neutral based on decelerating revenue growth and potential loss of HBA market share. Note negative FC director business and concerns over long-term InfiniBand penetration.

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Networking equipment maker QLogic Corp. said last week that it plans to repurchase up to $200 million of its shares over the next two years.

The stock trades for 9x cash flow.

Technology avaialable

6/05/07 $16.79

QLogic (QLGC) was upgraded from Sell to Hold, Citigroup said. $14 price target. Stock is already pricing in lower expected growth in the second half of the year.

Downgraded by Needham & Co from Buy to Hold

Downgraded by Caris & Company from Above Average to Average

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